Money or Ideas? A Field Experiment on Constraints to Entrepreneurship in Rural Pakistan

This paper identifies the relative importance of human and physical capital for entrepreneurship. A subset of rural microfinance clients were offered eight full time days of business training and the opportunity to participate in a loan lottery of up to Rs. 100,000 (USD 1,700), about seven times the average loan size. The study finds that business training increased business knowledge, reduced business failure, improved business practices and increased household expenditures by about $40 per year. It also improved financial and labor allocation decisions. These effects are concentrated among male clients, however. Women improve business knowledge but show no improvements in other outcomes. A cost-benefit analysis suggests that business training was not cost-effective for the microfinance institution, despite having a positive impact on clients. This may explain why so few microfinance institutions offer training. Access to the larger loan, in contrast, had little effect, indicating that existing loan size limits may already meet the demand for credit for these clients.

Bibliographic Details

Main Authors:	Gine, Xavier, Mansuri, Ghazala
Language:	English en_US
Published:	World Bank, Washington, DC 2014-06
Subjects:	ACCESS TO CAPITAL, ACCESS TO CREDIT, ACCOUNTING, ACCOUNTS, ADMINISTRATIVE RECORDS, ADVERTISING, AGRICULTURAL ACTIVITIES, BALANCE SHEET, BANK ACCOUNT, BANK DEPOSIT, BANK OFFICE, BOOKKEEPING, BORROWER, BORROWING, BUSINESS ACTIVITIES, BUSINESS CREATION, BUSINESS DECISIONS, BUSINESS ENTRY, BUSINESS EXPERIENCE, BUSINESS FAILURE, BUSINESS FAILURES, BUSINESS IDEAS, BUSINESS NEEDS, BUSINESS OPERATIONS, BUSINESS OWNER, BUSINESS OWNERSHIP, BUSINESS PERFORMANCE, BUSINESS PLAN, BUSINESS PLANNING, BUSINESS SECTOR, BUSINESS SKILLS, BUSINESS SUCCESS, BUSINESS SURVIVAL, BUSINESS TRAINING, BUSINESS WOMEN, BUYER, BUYERS, CAPACITY BUILDING, CAPITAL INJECTIONS, CAPITAL MARKET, CAPITAL REQUIREMENTS, COMMERCE, COMPUTER LITERACY, COST ANALYSIS, CREDIT CONSTRAINT, CREDIT CONSTRAINTS, CREDIT DECISIONS, CREDIT HISTORY, CREDIT OFFICERS, CREDIT PRODUCTS, CULTURAL NORMS, CUSTOMER LOYALTY, DEMAND FOR CREDIT, DISTRIBUTION SYSTEMS, E-MAIL, EMPLOYEE, EMPOWERMENT, ENTREPRENEURIAL ABILITY, EQUIPMENT, EXCHANGE RATE, EXPENDITURE, EXPENDITURES, FAMILIES, FARM ENTERPRISE, FARM ENTERPRISES, FEMALE BORROWERS, FEMALE BUSINESSES, FEMALE CLIENT, FEMALE CLIENTS, FEMALE ENTERPRISE, FEMALE ENTREPRENEUR, FEMALE ENTREPRENEURS, FEMALE ENTREPRENEURSHIP, FINANCIAL CAPITAL, FINANCIAL INSTITUTIONS, FINANCIAL LIBERALIZATION, FINANCIAL LITERACY, FINANCIAL MANAGEMENT, FINANCIAL RESOURCES, FIXED ASSETS, FIXED COST, GENDER, GENDER DIFFERENCES, GENDER EQUITY, GENDERS, GROUPS OF BORROWERS, GUARANTORS, HANDICRAFTS, HOUSEHOLD INCOME, HOUSEHOLD WELFARE, HOUSEHOLDS, HUSBAND, HUSBANDS, INFORMAL ECONOMY, INITIAL LOAN, INNOVATION, INNOVATION POLICY, INSTALLMENT, INSTALLMENTS, INTEREST RATE, INTERNATIONAL BANK, INVENTORY, JOINT LIABILITY, LABOR FORCE PARTICIPATION, LABOR MARKET, LABOR MARKETS, LENDER, LENDERS, LICENSE, LIVESTOCK LOAN, LIVESTOCK LOANS, LOAN, LOAN AMOUNT, LOAN AMOUNTS, LOAN APPLICANTS, LOAN DEFAULT, LOAN DEMAND, LOAN PAYMENTS, LOAN PRODUCTS, LOAN REPAYMENT, LOAN REPAYMENT RATES, LOAN REQUESTS, LOAN SIZE, LOAN SIZES, MANUFACTURING, MARKETING, MATERIAL, MICRO BUSINESS, MICRO ENTREPRENEURS, MICRO FINANCE, MICRO-CREDIT, MICROCREDIT, MICROFINANCE, MICROFINANCE INSTITUTION, MICROFINANCE INSTITUTIONS, MORAL HAZARD, NEW BUSINESS, NEW BUSINESSES, OPEN ACCESS, OUTSTANDING DEBT, OUTSTANDING LOAN, PERSONAL COMPETENCIES, PHYSICAL CAPITAL, POOR ACCESS, PRIVATE SECTOR, PRIVATE SECTOR DEVELOPMENT, PRODUCT DESIGN, PRODUCTIVITY, PROFITABILITY, PROTOCOLS, RECEIPTS, REPAYMENT, REPORTING, RESULT, RESULTS, SAFETY NET, SALES, SAVINGS, SELF-EMPLOYMENT, SELF-HELP, SHADOW ECONOMIES, START-UP, TIME PERIOD, TRAINING COURSE, TRAINING COURSES, URBAN AREAS, USERS, USES, VILLAGE, WEB, WOMAN, WOMEN BUSINESS OWNERS, WOMEN ENTREPRENEURS,
Online Access:	http://documents.worldbank.org/curated/en/2014/06/19749952/money-or-ideas-field-experiment-constraints-entrepreneurship-rural-pakistan https://hdl.handle.net/10986/19367
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